Owl Rock(US:OBDC)2025-02-20 19:52Financial Data and Key Metrics Changes - The fourth quarter net investment income (NII) was $0.47 per share, with a full year NII totaling $1.89 per share [9][36] - Return on equity (ROE) for the quarter was 12.4%, marking the eighth consecutive quarter of double-digit ROE, while the full year ROE was 12.2% [10] - The net asset value (NAV) per share at quarter-end was $15.26, approximately in line with the prior quarter [10][36] - Record dividends paid out in 2024 totaled $1.72 per share, reflecting a nearly 10% increase year over year [11] Business Line Data and Key Metrics Changes - The company originated a record number of investments in 2024, committing over $27 billion in direct originations, which was roughly double from 2023 [23] - In the fourth quarter, approximately $1.2 billion in new investment commitments were deployed, with over 97% consisting of first lien investments [24] - First lien investments increased from 68% to 76% of the portfolio, and combined with OBDE's portfolio, increased to 78% pro forma [25] Market Data and Key Metrics Changes - The non-accrual rate remained low at 40 basis points of the portfolio at fair value, decreasing to 30 basis points when combined with OBDE's portfolio [31] - The average loan-to-value (LTV) ratio of the portfolio was 44%, with a median EBITDA of portfolio borrowers at $119 million [26] Company Strategy and Development Direction - The merger with OBDE has positioned the company as the second-largest publicly traded BDC by total assets, enhancing competitive advantages and trading liquidity [20][21] - The company aims to optimize its portfolio and asset mix to improve yield, potentially increasing investments in strategic equity and joint ventures [49] - The strategic focus includes expanding into alternative and investment-grade credit as well as data centers, broadening the credit platform [15][64] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the portfolio despite economic pressures, with borrower revenues and EBITDA continuing to grow in the mid to high single digits year over year [27][34] - The company anticipates supportive market conditions in 2025, which may drive a potential pickup in M&A activity [46] - Management noted that while headwinds from lower rates and spreads are expected, the scale and presence of the credit platform will allow continued attractive returns [58][59] Other Important Information - The company has established a joint venture across all BDCs to create a more efficient investment structure [43] - Following the merger, the company plans to file a $750 million market equity issuance program to raise capital under supportive market conditions [42] Q&A Session Summary Question: What can Blue Owl Capital Corporation deliver in terms of ROEs in 2025 and beyond? - Management indicated that ROE could be in the range of 10% to 11% due to lower rates and spreads, but expects to offset some of this reduction through cost savings and portfolio optimization from the merger [56][58] Question: How far along is the portfolio in recognizing Fed rate cuts? - The portfolio is approximately 70% through recognizing the resets from the Fed rate cuts [71] Question: What proportion of the portfolio is still above market spreads? - About 10% to 15% of the portfolio could still be at risk of opportunistic refinancing with lower spreads [84] Question: Can you elaborate on the strategic equity investments? - Strategic equity investments are in specialized lending strategies, and while there are no immediate plans for new investments, the company remains open to opportunities that align with its high standards [92] Question: How does the company plan to utilize the ATM program? - The ATM program will be used to issue equity above book value, ensuring it is accretive and beneficial for shareholders [126][130]